AIMA: If EU diverges from G20 path on hedge fund regulation, it could fragment global markets

Opalesque industry update -
The European Union should not diverge from the path already set by the G20 on hedge fund regulation. Doing so could fragment global markets, create inconsistent regulatory requirements and result in international trade disputes. That’s according to the Alternative Investment Management Association (AIMA) – the global hedge fund industry association.

Andrew Baker, Chief Executive Officer of AIMA, said: “The G20 summits in Washington and London set the course for a new global regulatory framework for hedge funds and other private pools of capital. It is worth remembering just what world leaders did sign up to with regards to hedge funds. They agreed that all hedge fund managers should be registered and authorised by their national regulators, and that managers should report systemically relevant data to those regulators in the interests of financial stability. They concluded with an unambiguous declaration that they would not follow a protectionist path.

“While other members of the G20 have followed the agreed path, Europe’s Alternative Investment Fund Managers Directive is in danger of diverging from it through creating protectionist restrictions on non-EU funds and managers accessing EU investors, and by seeking to insert additional prescriptive product or fund-level regulation on issues like leverage and depositaries. None of this supports improved financial stability, which was the G20 goal. This potential divergence from the G20 path has caused significant concern globally.”

G20 Finance Ministers will meet on 22nd-23rd April in Washington DC. U.S. Treasury Secretary Timothy Geithner has written two letters on the AIFMD to European policymakers expressing his concerns that EU investors will be effectively barred from investing with non-EU hedge fund managers.

AIMA has also warned of a potential protectionist outcome from the Directive, saying that any restrictions imposed on European investors would also hit asset managers in financial centres such as the United States, Canada, Switzerland, Hong Kong, Singapore, Japan and Australia.

AIMA supports the goals of the G20 and the principle of increased transparency by the industry, including the reporting of systemically relevant data and the registration of hedge fund managers.

As the only truly representative global hedge fund association, AIMA, the Alternative Investment Management Association, has more than 1,100 corporate members (with over 4,500 individual contacts) worldwide, based in over 40 countries. www.aima.org.